Housing crisis on the horizon

There is grim news on the housing front this morning: the National Housing Federation (NHF) reports that the housing market will descend into “crisis” unless the supply of houses is dramatically increased. It points out that only 105,000 new homes were built last year, the smallest amount since the 1920s. This is a long-term trend, as demand has consistently outstripped supply.  The NHF thinks that those facts will not change and predicts homeownership will fall to the level of the mid-1980s, when Margaret Thatcher announced that her goal was to help “more and more people to own property.” The conclusion is obvious if those are the premises: average property prices will swell beyond the means of ordinary people. The NHF projects that average property prices will increase by 21 per cent over the next 5 years, from £214,647 to £260,304.

It’s a familiar litany. A Commons committee voiced similar misgivings in March, worrying that targets to build 150,000 affordable homes might be missed. The Labour Party has also been vocal on this subject, arguing that substantial cuts to the housing budget will only hasten the crisis.

The government, for its part, has been hyperactive. In the last 16 months, it has relaxed planning regulations and decentralised control to local authorities and communities. Its approach has been to incentivise construction with the ‘homes bonus’, which rewards councils for building affordable homes. The bonus pot is worth £250 million this year. Under the ‘neighbourhood planning scheme’, communities will be able to take control of local planning and build new homes and businesses as and where they wish. It’s hoped that locals will be more amenable to construction if they, rather than government authorities, master it.

The coalition has also released substantial tracts of government land onto the market, in the hope that developers will take it up. They have also dallied with Community Land Trusts, although, as Ed Howker argued over the weekend, there is some way yet to travel. Finally, the government is encouraging people to convert buildings to domestic use; houseboats are the latest example, although there are doubts as to how affordable a moored houseboat is, especially in London.

Grant Shapps, the housing minister, defended himself and his policies on the Today programme this morning. Shapps’ emphasis was solely on home ownership rather than making renting more afforable and secure, which was striking given the pressures in that market. He welcomed the news that home ownership is becoming more affordable, with 28 per cent of income being spent on mortgage repayments down from 48 per cent last year. But he conceded that there were “significant problems for first time buyers” because “we have not been building enough homes”. Shapps concluded that “the only long term solution is to build more homes.”